DE30: Linde-Praxair merger gets approval in China

Summary:

• Eurogroup to discuss EU’s bailout programme today

• DAX (DE30 on xStation5) bounces higher at the beginning of a new week

• Board of Thyssenkrupp (TKA.DE) agreed to split company into two units

Amid lack of the Chinese investors Asian trading was thinner than usual. The first trading session of the week on the continent was mixed. In Australia S&P/ASX 200 (AUS200) closed 0.57% lower despite manufacturing PMI beating expectations. On the other hand, Japanese Nikkei (JAP225) added 0.55% in spite of Tankan survey released by the Bank of Japan showing deterioration in outlook for the economy.

A mixed opening was witnessed on the European stock markets on Monday morning. Most of the major stock benchmarks from the Western Europe opened lower while gains were seen in the first minutes of trade in the eastern part of the continent. The UK and Italian shares performed the worst while equities in Poland accounted biggest advance during the opening. Banks were among the worst performing European stocks at the beginning of Monday’s trade while technology companies and refiners outperformed.

After steep decline on Friday the German DE30 (DAX futures underlying) bounced higher today. The index is trading in the vicinity of the 33-period moving average on the H4 interval (green line on the chart above). Notice that the benchmark painted a structure of subsequent lower highs and a break above the previous local high around 12445 pts could give bulls some hope for a longer recovery. Source: xStation5

Turkish President, Recep Erdogan, visited Germany at the end of previous week. The visit was viewed as an opportunity to repair ties between Turkey and Germany after the Turkish leader expressed vicious remarks about German authorities last year. However, the meeting eventually failed to boost relations between Germany and Turkey as Erdogan demanded extradition of a journalist that revealed Turkey was shipping weapons to Syria. Merkel opposed and demanded release of Germans jailed in Turkey. All in all, the visit turned out to be far from from what it was expected to be but given trade relationship between two countries (Germany is Turkey’s biggest trade partner) it is rather unlikely that the conflict will escalate on a much bigger scale.

Apart from that, finance ministers of the euro area countries will meet today at 2:00 pm BST. The aim of the meeting is to discuss the role of the EU bailout fund and actions allowing European countries to stabilize their economies and finance at times of economic downturn.

Major European stock indices after the first hour of trade:

• DAX (DE30): +0.57%

• FTSE 100 (UK100): -0.07%

• CAC40 (FRA40): +0.15%

• IBEX (SPA35): +0.30%

• FTSE MIB (ITA40): +1.09%

Linde (LIN.DE) significantly outperforms other DAX stocks on the back of merger clearance in China. Source: Bloomberg

Company News

Board of Thyssenkrupp (TKA.DE) agreed on Sunday to split the company into two separate units. The restructuring process will result in foundation of Thyssenkrupp Industrials and Thyssenkrupp Materials. Industrials will take care of the company’s elevator, automobile supplies and plant construction operations while Materials will focus on steel and metal-oriented businesses. Split marks several months of turmoil at company fuelled by departures of top executives and pressures from the investor activists. The separation was viewed as a new direction for the company and received optimist remarks from both, major shareholders and labour unions.

Topic of Linde (LIN.DE) and Praxair (PX.US) merger has been around for quite a long time already but it is still not over. Nevertheless, the process may be slowly coming to an end as two companies secured another regulatory clearance. The Chinese antitrust regulator approved merger of the World’s biggest suppliers of industrial gas. However, it is unknown whether the clearance is conditioned with asset sales like it was the case with approvals in some other countries.

Elsewhere, Werner Baumann, CEO of Bayer (BAYN.DE), expressed some upbeat remarks concerning company’s profit this year during an interview with Bild am Sonntag newspaper. Company expects a 4 billion euro increase in revenue this year, to 39 billion euros and the executive hinted that the company is very profitable but did not provided details. Apart from that, Baumann said that the impact of the Monsanto’s weed killer trial on the company is overblown by the media.

Linde (LIN.DE) share price plunged severely in 2015. However, the stock managed to overcome weakness since and even reached new ATH at €199.30 in the early-2018. In case the situation with the merger with Praxair continues to develop as expected Linde may revisit the area around €200 handle. Source: xStation5